We use cookies to customise content for your subscription and for analytics.If you continue to browse Lexology, we will assume that you are happy to receive all our cookies. For further information please read our Cookie Policy.

Government approves introduction of bill to amend the Arbitration and Conciliation Act, 1996

Seeking to ensure faster settlement of commercial disputes, the Union Cabinet on August 26, 2015 has cleared a proposal to amend the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) by introducing the Arbitration and Conciliation (Amendment) Bill, 2015 in the Parliament (“Arbitration Bill”). The proposed amendment to the Arbitration Act are based on the recommendations of the Law Commission of India in its 246th report and inputs from stakeholders.

The salient features of the amendments are as follows:

Section 11 of the Arbitration Act which deals with the appointment of arbitrators, is proposed to be amended by introducing a new sub-section to the effect that, an application for appointment of an arbitrator shall be disposed of by the High Court or the Supreme Court as expeditiously as possible, within 60 (sixty) days.

In order to ensure neutrality of arbitrators, section 12 of the Arbitration Act is proposed to be amended, mandating a prospective arbitrator to disclose in writing, about the existence of any relationship or interest of any kind, which may give rise to justifiable doubts. Further, any such person having a specified relationship, will be ineligible to be appointed as an arbitrator.

To incentivise quicker resolution of the disputes and avoid unnecessary delays on account of the arbitral tribunal, insertion of a new provision is proposed to the effect that the arbitral tribunal shall make its award within a period of 12 (twelve) months. This period may be extended up to 6 (six) months at the option of the parties. Thereafter, it can only be extended by the Court, on sufficient cause. The fees of arbitrator(s) may be reduced by maximum 5% (five percent) for each month of delay by the Court, if the Court finds that the proceedings have been delayed for reasons attributable to the arbitral tribunal. In the same vein, a provision for fast track arbitration is also proposed to be introduced in the Arbitration Act, wherein the arbitral award will be given in 6 (six) months’ time.

The amendment to section 17 of the Arbitration Act, would empower the arbitral tribunal to grant all kinds of interim measures including those which the Courts are empowered to grant under section 9 of the Arbitration Act, and such orders will be enforceable in the same manner as if it is an order of the Court.

The Arbitration Bill proposes to introduce a new section - section 31A, to govern the cost regime of arbitration, which would be applicable to both arbitrators as well as related litigation in court, with the intention of avoiding frivolous and meritless litigation.

Section 34 of the Arbitration Act which sets out the grounds for challenging an arbitral award, is proposed to be amended by restricting the explanation of the term ‘public policy of India’. The Arbitration Bill proposes to explain what could be treated as against public policy of India, which could include award induced or affected by fraud or corruption, or an award which contravenes the fundamental policy of Indian law or is in conflict with the most basic notions of morality or justice.

An amendment to section 36 of the Arbitration Act to provide that, an application for challenging the arbitral award would not automatically stay the execution of the award unless a specific order is passed by the Court. To expedite the execution of awards, another proposed amendment mandates that the Court will dispose of such an application challenging the award within 1 (one) year.

Additionally, amendments in the sections dealing, inter alia, with arbitration agreements, interim measures by the Court, conditions for the enforcement of foreign awards etc. are also proposed by the Arbitration Bill for making the arbitration process in India more effective.

The introduction of the Bill comes amidst the government’s move to promote ‘ease of doing business’ in India. The Government of India has approved amendments to the Arbitration Bill, in order to make arbitration a preferred mode for settlement of commercial disputes, by making it user-friendly and cost effective. The Law Commission of India, in its report, had recommended various amendments to the Act, so as to allow India to become a hub of International Commercial Arbitration.